New York state has granted insurance firm AIG (NYSE:AIG) access to loans of up to $20 billion from its own subsidiaries in an effort to shore up the insurers capital.

The giant insurer lost more than 60% of its value in today’s trading.

New York State Governor David Paterson said the deal was not a government bailout and that no taxpayers money would be involved. He said up to 30,000 New York jobs could be lost if he did not act.

On Sunday night, as Lehman Brothers (NYSE:LEH) prepared for bankruptcy and Merrill Lynch (NYSE:MER) sold itself to Bank of America, AIG asked the Federal Reserve for US$40 billion. Today’s bridge loan will buy the company some time to raise more money. Reuters reports that the Fed is in consultation with Morgan Stanley (NYSE:MS) over its possible options. Unconfirmed reports also put Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A, BRK.B) as a potential investor in AIG.

Paul R La Monica, editor at CNNMoney.com, says the collapse of AIG would have even bigger implications for the stock market than Lehman Brothers and other troubled lender Washington Mutual (NYSE:WM)

“AIG is a component of the venerable Dow Jones industrial average.

A further plunge in the value of AIG would threaten to drag the Dow deeper into bear market territory since there is still a long way to go down. AIG, with a current market value of $32.6 billion, is worth nearly five times more than Lehman and WaMu combined.

The firm had $110 billion in annual sales last year and employs 116,000 people, 44,000 more than the combined workforces of Lehman and WaMu.

In addition, AIG is a company that more average consumers deal with than Lehman, since the firm has a massive life insurance business and retirement planning unit.

With this in mind, it might be time for the editors of The Wall Street Journal, who manage the Dow Jones indexes, to start thinking about replacing AIG in the Dow.”

“When you can’t beg, borrow or steal the cash to pay your current obligations, you go bankrupt.” says Bill Bonner in The Daily Reckoning. Lehman Bros found that out the hard way. AIG may not get the chance to learn from this lesson either.

But what about the U.S. Government? Bill says the world’s biggest subprime borrower may soon be found out for what it is…